Correlation Between Emerson Electric and McPhy Energy
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and McPhy Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Emerson Electric and McPhy Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric Co and McPhy Energy SA, you can compare the effects of market volatilities on Emerson Electric and McPhy Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Emerson Electric with a short position of McPhy Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and McPhy Energy.
Diversification Opportunities for Emerson Electric and McPhy Energy
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Emerson and McPhy is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and McPhy Energy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McPhy Energy SA and Emerson Electric is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Emerson Electric Co are associated (or correlated) with McPhy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McPhy Energy SA has no effect on the direction of Emerson Electric i.e., Emerson Electric and McPhy Energy go up and down completely randomly.
Pair Corralation between Emerson Electric and McPhy Energy
Assuming the 90 days horizon Emerson Electric Co is expected to generate 0.32 times more return on investment than McPhy Energy. However, Emerson Electric Co is 3.17 times less risky than McPhy Energy. It trades about -0.24 of its potential returns per unit of risk. McPhy Energy SA is currently generating about -0.15 per unit of risk. If you would invest 12,190 in Emerson Electric Co on November 28, 2024 and sell it today you would lose (692.00) from holding Emerson Electric Co or give up 5.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Emerson Electric Co vs. McPhy Energy SA
Performance |
| Timeline |
| Emerson Electric |
| McPhy Energy SA |
Emerson Electric and McPhy Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and McPhy Energy
The main advantage of trading using opposite Emerson Electric and McPhy Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, McPhy Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in McPhy Energy will offset losses from the drop in McPhy Energy's long position.| Emerson Electric vs. JSC Halyk bank | Emerson Electric vs. Cembra Money Bank | Emerson Electric vs. New Residential Investment | Emerson Electric vs. COREBRIDGE FINANCIAL INC |
| McPhy Energy vs. AUTO TRADER ADR | McPhy Energy vs. TRADELINK ELECTRON | McPhy Energy vs. KENEDIX OFFICE INV | McPhy Energy vs. Tradegate AG Wertpapierhandelsbank |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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